3 year-end retirement reminders

This time of year, with all the extra holiday spending, managing to stay out of debt is an accomplishment in and of itself. But if you’ve somehow stayed within budget as you’re giving to others, don’t forget to take care of yourself — especially when it comes to your retirement. On this personal finance episode, I have a few reminders to help keep your retirement accounts in shape.

1) Save more with Individual Retirement Accounts

If you’ve paid down your high-cost debt and you’re able to put away more for retirement this year, you have until next year’s tax deadline of April 17, 2018, to put money in an IRA.

I cannot emphasize enough how smart it is to set up a Roth IRA early on in your career. A Roth IRA is a special retirement account that you fund with post-tax income, and withdrawals are tax-free. It makes the most sense if you expect your tax rate to be higher in retirement than it is now (which you most likely are when you’re starting out in your career).

For higher earners who make too much to put away in a Roth (the income limit for people married filing jointly is $186,000), you can still put more retirement money away in a traditional IRA where your contributions are tax deductible and your earnings grow tax-deferred. In other words, you’ll be taxed later when you withdraw funds, preferably after age 59 ½ to avoid paying any penalties.

In both types of IRAs, you can put up to $5,500 per year if you’re under 50 years old. For those over 50, the limit is $6500.

2) Convert smaller 401(k)s to a Roth IRA

When it comes to your 401(k), if you have a small amount in your account from a previous job, convert it to a Roth IRA, advises Ed Slott, a retirement expert and founder of IRAhelp.com. “Take control of your money by moving the funds from your previous employer and take advantage of being in a lower income tax bracket by growing your money tax-free in a Roth,” says Slott.

3) Required minimum distribution rules

For people older than 70½, you need to take your required minimum distributions (RMDs) – which means you have to withdraw money from your retirement accounts like your 401(k) and traditional IRA (not your Roth IRA) by Dec. 31 of this year.

It’s a little tricky and confusing so you may have to read this twice: If you turned 70½ in 2017, you have until April 1, 2018, to take your first RMD — a little bit of a grace period since it’s your first withdrawal.

But if it’s not your first withdrawal, Dec. 31, 2017, is your deadline. If you miss it, you could be penalized up to 50% of the amount you should’ve withdrawn on top of the regular income tax on the distribution.

To try to get out this penalty, you’ll have to go through filing form 5329 with your tax return and provide a valid reason for missing the RMD deadline.

So don’t put yourself last and take care of these things now. Your future, older, retired self, will thank you.